What is car leasing?
To even start discussing car leasing, it is important that you know what it is exactly. Car leasing is, for many people, an alternative to buying. You lease the vehicle for a certain period of time, and when the lease expires you have to return it to the dealer.
Is leasing better than buying?
It is for some people. Leasing bears some advantages in comparison to buying. It enables you to always drive the latest vehicle models and only pay for half of their price. Although some people prefer owning, there are many others who prefer the advantage of always driving state-of-the-art-vehicles.
How long does a leasing period last?
Car leasing periods vary from dealer to dealer. However, the most common leasing contracts are done for six to sixty months. Some leasing companies or dealers allow you to buy out the lease car after that period is over. However, if you wish you can make a new contract for a newer vehicle.
What are the Terms and Conditions to Lease a Vehicle?
When you lease a vehicle you are not only subject to a time period, you are also subject to a mileage allowance, which you should not exceed. In addition, you are required to pay a security deposit in case the vehicle gets damaged for tear and wear. If you return the vehicle in a good condition, you will get your security deposit back.
What happens if you go over your mileage allowance?
If you happen to go over your mileage allowance, you will be charged an extra fee, per exceeded mile. For this reason, if you drive a lot, car leasing may not be the best option for you. There are many car lease mileage calculators online that help you predict any mileage overage and associated fees.
What is the residual value of the lease vehicle?
The residual value of the lease vehicle is the predicted value of the car by the time the lease term is over. This value is a key factor when it comes to deciding the monthly payments on your lease, since when you lease a car you pay for the portion of the car you use.
What happens if your lease car gets stolen or totaled?
If your lease vehicle gets stolen or totaled, you will have to pay in full your remaining payments plus the residual value of the vehicle. Most lease vehicles count with a GAP insurance, which pays off the difference between the actual cash value of the car and the outstanding balance on your lease.
What happens if you return your lease vehicle before your term is over?
The voluntary surrender of a vehicle is treated by most lenders as repossession. Thus, it may negatively affect your credit score. Furthermore, most leasing companies apply penalties and fees for early surrender of the lease vehicle.